Live Export

Crunching the numbers on Indonesian quotas

James Nason, 14/09/2012

Butchers break down carcases for sale to Bakso ball manufacturers in a Jakarta wet market.The positive news for Australia’s embattled northern beef producers who rely heavily on live cattle exports to Indonesia is that, if they can hang on until the country’s presidential elections in 2014, there is a strong chance import quotas should increase after that date.

With economic growth in Indonesia rising at 6pc a year, and signs that a deepening beef shortage is causing the country to eat further into its female herd, there is an increasing view that reality will dictate that imports lift after 2014, regardless of which party, or coalition of parties, wins Government.

The bad news is things could get worse before they get better.

It is already known under the Indonesian Government’s five-year self-sufficiency plan that it intends to limit imports to 13pc of total consumption next year, and to less than 10pc in 2014.

The severe cutbacks in import quotas that occurred this year – a 66pc drop for boxed beef quotas and a 47pc drop for live cattle import quotas – came as the government stuck to its plan of limiting imports to 19pc of total consumption in 2012.

That would suggest that as imports reduce from 19pc of total consumption to 13pc, next year’s quotas will drop well below the 34,000t of boxed beef and 283,000 live cattle allocated this year.

But how 13pc of total consumption translates into actual numbers for live cattle and boxed beef in 2013 will ultimately come down to how the Indonesian Government crunches the numbers.

In overly simple terms, the key variables the Government will consider when calculating next year’s import quotas will be the projected size of the Indonesian population in 2013 and the expected beef consumption per head.

The calculations will be made against a backdrop of already tight supplies of beef in Indonesia, evidenced by prices of 110,000 Rupiah per kilogram in some wet markets during last month’s Ramadan and Labaran religious festivals, well above the usual peak IDR 70,000/kg. 

Indonesians expect to be able consume traditional beef dishes such as rendang during major religious celebrations, which exerts some pressure on the Government not to allow supply limitations to force prices too high.

Additionally, Indonesian feedlots are currently operating at 50 percent of total capacity. With local cattle proving very difficult to source, and with what is left of the 90,000 head of feeder cattle import quotas for the second half of 2012 close to being used up, feedlots may well be empty by the end of the year without further quota allocations. That not only has implications for beef supply in Indonesia early next year, but also for the many farmers that rely on supplying fodder to feedlots and the workers that rely on each facility for income.

Will 2013 quotas rise or fall?

One Indonesian trade source explained to Beef Central that the Government does have an option to increase beef and cattle import volumes to ease the supply situation next year, while still being seen to adhere to its five-year self-sufficiency plan.

Effectively, it comes down to the arbitrary figure the Government applies to per capita beef consumption when it calculates next year’s beef supply requirements.

“They do have an exit strategy – they can say that the economy is growing and beef consumption per head will increase,” the import industry stakeholder explained.

“If they lift the figure for per capita consumption from 1.9kg to 2.4kg, across 240 million people you can imagine how many extra tonnes of beef that 0.5kg per head is.

“It all depends on the consumption figure they start with. If consumption is increased to 2.3kg per head, times a bigger population next year, the number of imported cattle and beef could still increase next year.

“So a reduction to 13pc does not necessarily mean fewer cattle.”

The Indonesian Government last month granted an additional 8500t of boxed beef quota on top of the 34,000t allocated for 2012 to easy supply concerns in the second half of the year. Lot feeders are also hopeful that their ongoing efforts to invest in local breeding programs within Indonesia, and to support Indonesian farmers, will also encourage the Government to increase feeder cattle import quotas before 2012 is over.

The question of whether import permits will increase or reduce next year is likely to be answered when the Government releases quotas for 2013 some time in mid-December.

Brazil momentum increases

Another clear signal from Indonesia is the extent to which the push by some parliamentarians within Indonesia to open its market to beef imports from Brazil is gaining momentum.

While many in Indonesia say the ongoing quota cutbacks were always going to happen under their country’s self-sufficiency plan, and were not directly linked to last year’s decision by Australia to cut off cattle supply to Indonesia without warning in the approach to Ramadan, there is acknowledgement that the ban provided fuel to the campaign by some sectors of Indonesia’s parliament to diversify the country’s beef supply by allowing imports from Brazil and India.

At the same time, while the Australian Government’s relationship with Indonesia remains strained, the Brazilian Government has been throwing significant resources at building trade across a whole range of commodities, including beef, with Indonesia.

Brazil has recently invited a large number of Indonesian parliamentarians to its country and its amabassador and trade officials are reported to have strong relationships with key Indonesian Government figures.

Indonesian law currently prevents the importation of beef from any country where Foot and Mouth Disease is prevalent. A push was mounted two years ago to allow Indonesia to import beef from FMD-free zones within FMD-affected countries, such as Brazil and India, however the supreme court rejected the push, based on the risk it posed to Indonesia’s own FMD-free status.

Indonesian parliamentarians have recently relaunched the campaign to open the Indonesian market to Brazilian beef, with the case set to be heard in the supreme court again in coming months.

NT Govt works on relationship rebuild

In the meantime the newly elected coalition Government in the Northern Territory is taking up the challenge of trying to rebuild its relationship with the Indonesian Government.

NT minister for primary industry Willem Westra van Holthe has just returned from a visit to the country and says his fact-finding mission was extremely positive.

“I was extremely pleased with the discussions I had in Indonesia and saw first-hand how the effects of the live cattle ban have impacted upon all facets of the trade and associated businesses,” Mr Westra van Holthe said.

“During my talks with various industry and business representatives I made it very clear that the Territory is adaptable to changes that lead to improvements in the live export trade for both nations.

“Indonesia welcomes the significant work undertaken by Australian and Indonesian industry in regards to live cattle exports which have seen a dramatic improvement in animal welfare standards through the Export Supply Chain Assurance System.

“I believe that if handled correctly, there are opportunities for both countries to work in partnership to achieve better outcomes for all stakeholders.”



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